Evan Schuman's StorefrontBacktalk

Spreading holiday joy among its suppliers, the nation’s largest retailer has softened its RFID compliance deadline.

In a briefing with analysts, Wal-Mart CIO Linda Dillman said that its top 100 suppliers?plus 37 “volunteer” suppliers?will start shipping cases and pallets by February to three Wal-Mart distribution centers. The original deadline was Jan. 1.

Wal-Mart officials have softened the rollout to phase in through “early February,” said Christine Spivey Overby, an RFID analyst with Forrester Research. According to Overby, one Wal-Mart executive said that some suppliers waited too long to place orders for tags, which means the tags won’t ship until late January or even early February.

“I think there will be no big bang [on Jan. 1], and I don’t think they ever expected a big bang,” Overby said in an interview. “What’s going to be happening in January is a pilot on steroids.”

Based on preliminary testing, Wal-Mart also is seeing a better-than-hoped-for percentage of products being tagged. “Wal-Mart calculates that, while tagging plans vary from less than one percent to 100 percent, suppliers will tag an average of 65 percent of these supply chain units,” Overby said.

Another analyst?Kara Romanow, a research director at AMR Research?heard the same figures, but suspects some statistical sleight of hand.

“At the risk of not complying with Wal-Mart’s mandate, almost every single supplier will be technically compliant, each tagging a handful of products,” Romanow said, adding that most will tag between two and 10 products. “In some cases, those SKUs actually represent the same product with different colors or flavors. Wal-Mart reported to us that the average SKU count being tagged is 65 percent, but we believe that is heavily skewed toward smaller suppliers and volunteers that only have a handful of products and are therefore tagging a higher percentage of their products.”

The Wal-Mart testing hasn’t been limited to its key distribution centers, according to the analyst briefing. Since April, Wal-Mart and eight of its top 100 suppliers have been testing tag and reader performance across both distribution centers and Wal-Mart stores for about two dozen products, a Forrester report said.

The good news is that accuracy has sharply improved. But is it good enough? “Yes, Wal-Mart is reporting that the accuracy has improved. Does it mean that they’re where they want to be? Not by any means,” Overby said.

“While initial read rates were between 40 percent and 60 percent, the Wal-Mart team indicated that it’s now seeing rates in the high 90s at key read points like the manual conveyor and box crusher,” Overby said. “One exception the team noted: It’s currently only reading between 50 percent and 90 percent of cases moving from the back room to the front of the store on a pallet. Still, Dillman and the team see this as significant progress, as Wal-Mart couldn’t track this movement previously.”

An unexpected benefit of RFID, according to the Wal-Mart briefing, is the ability to remotely watch pallets to keep store traffic flowing optimally. “Wal-Mart can now ‘see’ if pallets and stocking carts are off the floor by 7 a.m., which reduces clutter in the aisles during prime shopping hours,” Overby said. “When it comes to RFID’s impact on product availability, the team admitted that it and the suppliers are learning how to measure the correlation.” She said a Wal-Mart executive pointed to product availability as “one number that we [still] can’t measure. We won’t know the impact until we start fixing and measuring.”